If any defect occurs in your property title, the consequences could be costly to deal with. Much of the financial losses are manifested in the form of hefty legal expenses. The key is to invest in title insurance to keep your title protected.
Here are the details:
What is title insurance?
Title insurance is a typical example of indemnity insurance. The aim of title insurance is to protect homebuyers and lenders from any sorts of financial losses sustained by any defect in a property title. The lender’s title insurance is also a type of title insurance. The borrower purchases this type of title insurance in order to protect the lender’s equity in the property. The other type is the owner’s title insurance. The seller purchases this one to protect the buyer and their equity.
Why is title insurance necessary?
Your title is said to be ‘dirty’ if it contains any unresolved building codes or erroneous surveys. Every real estate transaction requires you to have a clear title. This is why most title companies always run a search on all the titles and see if they carry any liens or claims before they’re issued. This is their way to examine and search public records to confirm the property’s legal ownership and check whether there are any liens on the property.
The title insurance is essential because it protects both the homebuyers and lenders from any sort of damage that may result from the defects or liens on the title. Title insurance also protects your titles from claims such as liens, easements, conflicting wills, and back taxes.
Instead of title insurance, certain private transactions also carry a warranty of title. This guarantees the buyer that the seller has all the legal rights to transfer ownership of the property. This ascertains that they’re the only ones who can do so.
What does the title insurance policy cover?
In its basic form, the title insurance covers a number of hazards including those resulting from flawed records, incorrect signatures, forged documents, restrictive covenants, unrecorded easements, claims of ownership by another party, and any encumbrances against the property.
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